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OpenAI Retreats from Restructuring Plan, Nonprofit Retains Control Amid Lawsuit and Public Backlash

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OpenAI has reversed course on a major restructuring plan, announcing on Monday that its nonprofit parent will retain control over its for-profit arm — a move aimed at easing growing criticism and legal pressure, including a lawsuit from co-founder Elon Musk.

In a blog post, CEO Sam Altman emphasized that OpenAI will remain under nonprofit oversight, countering a December proposal to convert the for-profit unit into a Public Benefit Corporation (PBC). That plan, which would have diluted nonprofit control in favor of capital-raising flexibility, faced strong pushback from civic leaders, regulators, and former OpenAI insiders.

“We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware,” said Bret Taylor, chairman of OpenAI’s board.

While the nonprofit will remain the controlling entity and a major shareholder, OpenAI still plans to proceed with uncapping investor profits and revising its for-profit structure to attract future funding. The company is also working with Microsoft, regulators, and other stakeholders to finalize equity distribution under the updated plan.

However, critics say the announcement lacks clarity. Page Hedley, a former OpenAI ethics adviser, said the nonprofit’s reduced ownership stake raises questions about whether OpenAI’s mission — ensuring artificial general intelligence (AGI) benefits all of humanity — will remain legally paramount under the revised structure.

Meanwhile, Elon Musk’s lawsuit will proceed, with his legal team dismissing the move as a cosmetic change. Attorney Marc Toberoff argued that the new structure hides how much control the nonprofit has ceded to the for-profit business.

Despite the controversy, Altman said investor confidence remains strong, and that the company can still raise up to $40 billion in new funding, including a proposed round led by SoftBank at a $300 billion valuation.

The update comes as the AI arms race intensifies, with OpenAI seeking a delicate balance between mission fidelity and capital flexibility, all while navigating legal scrutiny, ethical concerns, and internal leadership tensions.

Elon Musk to Proceed with Lawsuit Against OpenAI Despite Nonprofit Control Assurance

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Elon Musk will continue pursuing his lawsuit against OpenAI, his attorney Marc Toberoff confirmed on Monday, despite the company reaffirming that its nonprofit parent will retain control over its for-profit arm.

OpenAI, co-founded by Musk, had recently proposed a governance plan that maintains its nonprofit entity’s control over its for-profit operations and gives it a significant shareholder position. However, Musk’s legal team claims the move is superficial and insufficient.

“Nothing in today’s announcement changes the fact that OpenAI will still be developing closed-source AI for the benefit of [CEO Sam] Altman, his investors, and Microsoft,” said Toberoff. He criticized the plan for lacking transparency, particularly regarding the nonprofit’s diluted stake in the for-profit venture.

Musk, who has grown increasingly critical of OpenAI, accuses the company of abandoning its original mission of open-source development for public benefit. His lawsuit aims to block what he describes as a corporate shift toward private enrichment, particularly in favor of Microsoft, a key investor and partner.

OpenAI dismissed Musk’s lawsuit as meritless, with a company spokesperson stating, “Elon continuing with his baseless lawsuit only proves that it was always a bad-faith attempt to slow us down.”

The case is expected to proceed to jury trial in March 2026. It has drawn wide attention from other tech leaders and AI researchers, including Meta and Geoffrey Hinton, the “godfather of AI,” who have raised concerns about the implications of powerful AI being developed under private control without sufficient regulatory oversight.

OpenAI Said to Be Developing an AI-Driven Social Media Network

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OpenAI is reportedly preparing to launch its own social media platform, according to recent reports. The San Francisco-based artificial intelligence company is said to be working on integrating AI capabilities into this new social app, though specifics about how the AI features will be used remain unclear. The platform is rumored to be positioned as a competitor to Elon Musk’s X (formerly Twitter) and the suite of social apps owned by Mark Zuckerberg’s Meta. Notably, both X and Meta have recently introduced AI features into their ecosystems, highlighting a growing trend of blending AI with social experiences. This news surfaces just days after OpenAI announced its latest advancements with the GPT-4.1 family of models.

According to a report from The Verge, OpenAI’s social platform could be based heavily on ChatGPT. Sources close to the project suggest that an internal prototype already exists, reportedly emphasizing GPT-4o’s image-generation capabilities. The platform’s design includes a public feed where AI-created images may be displayed, hinting at a highly visual, content-driven experience. While it has been described as similar to X, the integration of generative AI at the core could set OpenAI’s project apart from more traditional social networks.

CEO Sam Altman has reportedly sought external feedback on the early prototype, though major questions remain. It is still unclear whether OpenAI intends to launch a standalone social app or incorporate these features directly into the existing ChatGPT interface. Observers have pointed out similarities to OpenAI’s video generation platform, Sora, which also features a content feed—though Sora lacks a true social element, as creators are not identified. Early indications suggest that OpenAI’s approach might prioritize showcasing AI capabilities in a social context, rather than building a purely human-driven network supplemented by AI, like X or Instagram.

The move into social media would also intensify OpenAI’s ongoing rivalry with X and Meta. Elon Musk, owner of X, has been openly critical of Sam Altman and OpenAI’s shift toward a for-profit structure. Musk previously filed a lawsuit against the company and even made a bid to acquire it, to which Altman responded sharply, joking that OpenAI would instead offer to buy Twitter for $9.74 billion. With tensions already high, OpenAI’s entry into the social networking space could further escalate competition among tech giants racing to dominate the future of AI-powered digital experiences.